Hello from Colorado Springs!
I hope all is well with each of you.
As discussed in the 3Q 2024 quarterly memo, much has been happening behind the scenes at Vailshire in recent months. Voluntarily withdrawing Vailshire's registration as an investment advisor and closing down its separately managed account services have required much time and effort on my part.
Going forward, I am greatly looking forward to focusing much more intently on Vailshire Partners LP hedge fund and doing my best to outperform traditional stock and bond portfolios. So far, so good!
As the US Net Liquidity and Global M2 chart (below) shows, US net liquidity remains rangebound within a 2.5-year choppy sideways pattern. The performance of US-based micro/small/mid-cap stocks tend to reflect the movement of US net liquidity and, accordingly, continue to be crab-like (moving sideways) in their performance.
Good news, however, can be seen in the lower half of the chart, which depicts global M2 monetary supply. Unlike US net liquidity, global M2 has finally broken higher out of its roughly three-year range of consolidation. This bodes well for global risk assets and stores of value like bitcoin, gold, and US megacap technology stocks. Since I write about this topic often, it is no surprise that these global assets are at or near all-time highs... and we are finally seeing good results in our fund again, after several months of crabby behavior!
Coordinated central banks around the world are shifting their *efforts* from inflation reduction to economic support. Lower federal fund (and related) short-end interest rates mean lower variable rates for individuals and small businesses. And this directly translates into more cash in the bank for future investments.
I expect the coming quarters to reveal a surprisingly strong US economy (to the dismay of many Doom and Gloomers), as well as a return (thought tempered) of inflation, in the US and around the world. This expected combination of mildly expanding economic growth and inflation, along with central bank easing, may result in a healthy performance of risk assets and bitcoin as we head into 2025.
US Net Liquidity and Global M2 Update (see chart below). As the graph shows, US net liquidity has continued to chop sideways over the past ~2.5 years. However, global M2 monetary supply has *finally* broken to the upside after an approximately three-year stint of consolidation. -- Based on the large allocation of high beta global assets within our fund, this bodes well (in my opinion) for the coming quarters!
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